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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT(A), VIII, New Delhi dated 15/07/2011 for the Assessment Year 2007-08. 2. The revenue has raised the following grounds of appeal:- “1. The order of the ld CIT(A) is erroneous and contrary to fact and law. 2. on the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in deleting the penalty imposed by the AO u/s 271(1)(c) of the IT Act ignored that 2.1 The claim made by the assessee was prima facie incorrect, without any basis and it was not a case where two opinions about the applicability of the section/ provision of law were applicable. 2.2 The assessee is a company having professional assistance in computation of its income and its accounts being subjected to audit, the assessee failed to explain as to why disallowance was not made in the return itself. 2.3 That the ration as laid down by the Hon'ble Delhi High Court in the case of CIT Vs. Escorts Finance Ltd. (328 ITR 44) and in the case of CIT Vs. Zoom communication Pvt. Ltd (327 ITR 510) is clearly applicable in this case.”
3. The assessee is a company filed its return of income on 30.10.2007 declaring loss of Rs. 6651101/-. The case of the assessee was taken up for scrutiny and Page 2 of 3 during the course of assessment proceeding the assessee was asked to produce the books of accounts and on further verification the Assessing Officer has observed that the assessee has not deducted tax at sources on sum paid of Rs 4798530/ hence disallowance was made u/s 40a (ia) of the act. Therefore the returned loss of Rs 6651101/- was assessed at loss of Rs 1852571/-. Penalty proceedings u/s 271(1) (c) of the act were also initiated.
4. In response to the penalty proceedings, as per penalty order, none appeared before ld AO and therefore he levied penalty of Rs. 1615185/-. Assessee appealed before the ld CIT (A) who deleted the penalty and therefore revenue is in appeal before us.
Ld DR submitted a written submission on the issue where as none appeared for assessee and hence on the basis of material available, issue is decided on merits.
The only issue involved in the appeal is when the disallowance is made u/s 40a (ia) on non-deduction of tax at sources whether on such disallowance penalty u/s 271(1)(c) of the act can be levied or not. We are fully in agreement with the argument of the ld AR that penalty in cases for disallowance on account of non deduction of tax may be levied in cases where it is proved that assessee has furnished inaccurate particulars of income in its return of income. Penalty cannot be levied only in the circumstances assessee in its return of income discloses all details and material particulars, which it was expected to, do so under the law. In the present case neither the ld CIT (A) as well as the ld AO has seen whether the particulars have been disclosed by the assessee in the manner in which it is required to be disclosed , such as in tax audit report etc. It is also not on record that whether the assessee is required to deduct tax at sources but has not deducted the same because of some different point of view. Merely because the assessee does not have enough money it cannot help, assessee in saving penalty u/s 271(1) (c) of the act. Only condition to be seen by the lower authorities was whether the asssessee has concealed income or furnished inaccurate particulars of income. Further, merely because addition/ disallowance are made in quantum proceedings cannot invite penalty automatically as both are independent proceedings. Further, whether it is surrender or agreeing to addition on being caught violating law